Unity Software’s Trading Debut Win Ends IPO Spree on High Note

September 20, 2020 By [email protected]_84 Off

(Bloomberg) — Unity Software Inc., which makes software to design video games, jumped 31% in its trading debut, capping a week of big successes for newly public companies in the sector.

a person using a laptop: Gamers use keyboards to play a Microsoft Corp. XBox computer game at the Gamescom gaming industry event in Cologne, Germany, on Tuesday, Aug. 21, 2018.

© Bloomberg
Gamers use keyboards to play a Microsoft Corp. XBox computer game at the Gamescom gaming industry event in Cologne, Germany, on Tuesday, Aug. 21, 2018.

The San Francisco-based company raised $1.3 billion in an initial public offering at $52 a share that topped a marketed range of $44 to $48 that had been elevated earlier. The shares opened trading Friday at $75 and closed the day at $68.95, giving Unity Software a market value of $18 billion.


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The offering was the fourth major listing on a U.S. exchange this week by a software maker. Snowflake Inc., which raised $3.86 billion including so-called greenshoe shares in the biggest-ever U.S. software IPO, finished the week with its stock exactly double the offer price.

JFrog Ltd. and Sumo Logic Inc. also delivered strong debuts, with JFrog climbing 47% after its $585 million offering including the greenshoe overallotment and Sumo Logic rising 14% for the week after its $326 million offering.

For More: Sumo Logic’s Trading Debut Rise Adds to Software’s Strong Week

The four companies were among 24 that went public this week on U.S. exchanges, raising a combined $11.7 billion, according to data compiled by Bloomberg.

Telemedicine, Psilocybin

Companies that fared well included telemedicine provider American Well Corp. and Compass Pathways Ltd., which has patented a synthetic version of the hallucinogen psilocybin to help treat depression. American Well ended the week up 28% from its offer price while Compass climbed 71% in its debut.

Less trendy listings finished on the down side. Broadstone Net Lease Inc., a real estate investment trust,priced its IPO at the bottom of its marketed range to raise $570 million on Wednesday and fell 1.5% since then.

Packaging and container maker Pactiv Evergreen Inc. had one of the worst launches this year on a U.S. exchange. After pricing its shares below its targeted range to raise $575 million, the company’s stock dropped 22% in its debut Thursday and is now down 15% from the offer price.

Unity Software Chief Executive Officer John Riccitiello said the company’s listing benefited from deploying an auction process to sell shares in the IPO.

Auction Pricing

“We don’t want to make decisions based on hearsay when we can make decisions based on what investors think and why they think it,” Riccitiello said in an interview.

The company gathered orders by having investors input them onto a computer system instead of through the banks’ sales representatives, according to people familiar with the matter who asked to not be identified because the matter is private. That allowed Unity Software and its bankers to be better informed on demand at each potential price, a contrast to the typical process in which prospective investors could submit vague orders.

Investors weren’t given price guidance before the price was determined and bankers signed non-disclosure agreements that prohibited them from discussing the order books with clients, the people said. Investors also weren’t allowed to revise their orders after the price was determined, according to the people.

Cashing Out

Unity Software also made changes to its lockup structure to allow employees other than executives to cash in a portion of their shares starting the first day of trading, according to the company’s filings with the U.S. Securities and Exchange Commission.

For the six months ended June 30, Unity Software had a net loss of $54 million on revenue of $351 million, its said in its filings.

The company is helping the video game businesses be more efficient, said board member Roelof Botha, a partner at the venture capital firm Sequoia Capital, which is an investor.

“Companies now rely on a third-party specialist who provides an engine so they don’t have to,” Botha said. “Gaming is now larger than movies and music combined.”

The offering was led by Goldman Sachs Group Inc. and Credit Suisse Group AG. The company’s shares are trading on the New York Stock Exchange under the symbol U.

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